UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the period ended December 31, 1995
-------------------
Commission File Number: 0-10666
-------------------
NBTY, Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2228617
------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Orville Drive, Bohemia, NY 11716
------------------------------ -----------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (516) 567-9500
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registration was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Shares of Common Stock as of December 31, 1995: 18,435,119
----------
NBTY, INC. and SUBSIDIARIES
INDEX
PART I Financial Information
Condensed Consolidated Balance Sheets -December 31, 1995
and September 30, 1995 1 - 2
Condensed Consolidated Statements of Income -Three Months
Ended December 31, 1995 and 1994 3
Condensed Consolidated Statements of Cash Flows - Three
Months Ended December 31, 1995 and 1994 4 - 5
Notes to Condensed Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 10
PART II Other Information 11
Signature 12
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 430,549 $ 10,378,476
Accounts receivable, less allowance
for doubtful accounts of $608,004
at December 31, 1995 and $591,028
at September 30, 1995 12,704,998 12,354,545
Inventories 40,781,972 36,972,592
Deferred income taxes 1,846,875 1,846,875
Prepaid catalog costs and other current
assets 8,147,140 6,170,243
----------------------------
Total current assets 63,911,534 67,722,731
Property, plant and equipment 77,646,340 70,737,588
less accumulated depreciation
and amortization 23,556,308 22,413,012
----------------------------
54,090,032 48,324,576
Intangible assets, net 4,455,507 5,813,031
Deferred income taxes 574,611 574,611
Other assets 1,065,773 1,668,309
----------------------------
Total assets $124,097,457 $124,103,258
============================
</TABLE>
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 550,333 $ 358,675
Accounts payable 17,075,607 16,411,562
Accrued expenses 7,549,011 10,287,989
----------------------------
Total current liabilities 25,174,951 27,058,226
Long-term debt, less current portion 12,303,813 10,924,454
Deferred income taxes 2,736,148 2,736,148
Other liabilities 768,985 768,985
----------------------------
Total liabilities 40,983,897 41,487,813
Commitments and contingencies
Stockholders' equity:
Common stock, $.008 par; authorized
25,000,000 shares; issued 19,907,676
shares at December 31, 1995 and
19,207,676 at September 30, 1995 and
outstanding 18,435,119 shares at
December 31, 1995 and 17,766,119 at
September 30, 1995 159,262 153,662
Capital in excess of par 55,504,481 54,151,206
Retained earnings 30,405,444 30,656,586
----------------------------
86,069,187 84,961,454
Less 1,472,557 treasury shares at cost,
at December 31, 1995 and 1,441,557
treasury shares at September 30, 1995 2,518,127 2,346,009
Stock subscriptions receivable 437,500 0
----------------------------
Total stockholders' equity 83,113,560 82,615,445
----------------------------
Total liabilities and stockholders'
equity $124,097,457 $124,103,258
============================
</TABLE>
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months
ended December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net sales $38,589,126 $37,477,741
Costs and expenses:
Cost of sales 20,810,228 19,097,506
Catalog printing, postage and promotion 4,564,180 4,075,142
Selling, general and administrative expenses 13,515,907 12,615,673
---------------------------
38,890,315 35,788,321
---------------------------
Income (loss) from operations (301,189) 1,689,420
---------------------------
Other income (charges):
Interest expense (304,898) (239,163)
Miscellaneous, net 194,460 197,396
---------------------------
(110,438) (41,767)
---------------------------
Income (loss) before income taxes (411,627) 1,647,653
Income taxes (benefit) (160,485) 709,112
---------------------------
Net income (loss) ($ 251,142) $ 938,541
===========================
Earnings (loss) per common share and common
share equivalents: ($0.01) $0.05
===========================
Weighted average common shares and common
share equivalents: 19,851,070 20,075,664
===========================
</TABLE>
See notes to condensed consolidated financial statements.
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months
ended December 31,
----------------------------
1995 1994
----------------------------
<S> <C> <C>
Net income (loss) ($ 251,142) $ 938,541
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 1,295,597 1,201,014
Provision (recovery) for allowance for doubtful accounts 16,976 (3,494)
Increase in deferred taxes 0 50,000
Changes in assets and liabilities, net of acquistions:
Increase in accounts receivable (367,429) (180,561)
(Increase) decrease in inventories (3,809,380) 789,294
(Increase) decrease in income tax receivable 0 997,600
Increase in prepaid catalog costs and other current assets (1,976,897) (154,979)
(Increase) decrease in other assets 1,516,403 (137,306)
Increase in accounts payable 664,045 1,835,820
Decrease in accrued expenses (2,738,978) (2,574,806)
---------------------------
Net cash provided by (used in) operating activities (5,650,805) 2,761,123
---------------------------
Cash flow from investing activities:
(Increase) decrease in intangible assets 1,212,732 (936,285)
Purchase of property, plant and equipment (6,908,752) (4,766,910)
---------------------------
Net cash used in investing activities (5,696,021) (5,703,195)
---------------------------
Cash flows from financing activities:
Net payments under line of credit agreement 0 (2,500,000)
Borrowings under long term debt agreement 1,657,612 2,400,000
Principal payments under long-term debt agreements (86,594) (625,196)
Purchase of treasury stock (172,118)
Proceeds from stock options exercised 0 24,000
---------------------------
Net cash provided by (used in) financing activities 1,398,899 (701,196)
---------------------------
Net decrease in cash and cash equivalents (9,947,927) (3,643,268)
Cash and cash equivalents at beginning of year 10,378,476 5,900,594
---------------------------
Cash and cash equivalents at end of quarter $ 430,549 $ 2,257,326
===========================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 295,023 $ 235,682
Cash paid during the period for taxes $ 53,444 $ 44,350
===========================
</TABLE>
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 1995 and 1994
Supplemental Schedule of Investing and Financing Activities:
In November 1995, options were exercised with 700,000 shares of common
stock issued to certain officers for an interest bearing note in the
amount of $437,500. As a result of the exercise of these options, the
Company is entitled to a compensation deduction for tax purposes of
approximately $2,362,500 and it is estimated that such compensation
deduction will ultimately result in a tax benefit of approximately
$921,000 which has been recorded as an increase in capital in excess of
par. In addition, the Company has adjusted its other current assets to
recognize the effect of this tax benefit.
In December 1994, options were exercised with 430,000 shares of common
stock issued to certain officers and directors for $24,000 and an interest
bearing note in the amount of $191,000. The promissory note, including
interest, was paid by the surrender of 23,153 NBTY common shares to the
Company at the prevailing market price. As a result of the exercise of
these options, the Company is entitled to a compensation deduction for tax
purposes of $1,827,500 and a tax benefit of $731,000 which has been
recorded as an increase in capital in excess of par. In addition, the
Company has adjusted its current liability to recognize the effect of this
tax benefit.
See notes to condensed consolidated financial statements.
NBTY, INC. and SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary
to present fairly its financial position as of December 31, 1995 and
results of operations for the three months ended December 31, 1995
and 1994 and statements of cash flows for the three months ended
December 31, 1995 and 1994. The consolidated condensed balance sheet
as of September 30, 1995 has been derived from the audited balance
sheet as of that date. This report should be read in conjunction with
the Company's annual report filed on Form 10-K for the fiscal year
ended September 30, 1995.
2. The results of operations and cash flows for the three months ended
December 31, 1995 are not necessarily indicative of the results to be
expected for the full year.
3. On October 9, 1995, the Company sold certain assets of its direct-
mail cosmetics business for approximately $2,495,000. The Company
received $350,000 in cash and non-interest bearing notes aggregating
approximately $2,145,000 for inventory, a customer list and other
intangible assets. The notes will be paid over a three-year period
based on a predetermined formula with guaranteed minimum payments. A
final payment for the remaining outstanding balance will be made on
September 30, 1998. Revenues applicable to this business were
approximately $2,355,773 for the three months ended December 31, 1994.
4. Inventories have been estimated by using the gross profit method for
the interim periods. The components of the inventories are as
follows:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
(UNAUDITED)
<S> <C> <C>
Raw materials and work-in-process $19,268,120 $17,746,844
Finished goods 21,513,852 19,225,748
---------------------------
$40,781,972 $36,972,592
===========================
</TABLE>
5. Intangible assets, at cost, acquired at various dates are as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
(UNAUDITED)
<S> <C> <C>
Goodwill $ 469,400 $ 469,400
Customer lists 8,783,475 10,540,017
Trademark and licenses 1,177,842 1,134,514
Covenants not to compete 1,304,538 1,304,538
---------------------------
11,735,255 13,448,469
Less, accumulated amortization 7,279,748 7,635,438
---------------------------
$ 4,455,507 $ 5,813,031
===========================
</TABLE>
6. Accrued expenses:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
------------ -------------
(UNAUDITED)
<S> <C> <C>
Payroll and related payroll taxes $1,837,048 $ 2,166,355
Customer deposits 553,233 2,034,175
Accrued purchases 757,756 1,734,844
Income taxes payable 39,815 39,815
Other 4,361,159 4,312,800
---------------------------
$7,549,011 $10,287,989
===========================
</TABLE>
7. Treasury stock. The Company purchased 31,000 shares for $172,118 in
open market transactions using working capital.
8. Earnings (loss) per share are based on the weighted average number of
common shares and common equivalent shares outstanding during the
three month periods ended December 31, 1995 and 1994. The
calculation of earnings (loss) per share include common stock
equivalent shares from stock options of 1,680,602 and 2,389,870 for
the three month periods ended December 31, 1995 and 1994, respectively.
9. In November 1995, options were exercised with 700,000 shares of
common stock issued to certain officers for an interest bearing note
in the amount of $437,500. As a result of the exercise of these
options, the Company is entitled to a compensation deduction for tax
purposes of approximately $2,362,500 and it is estimated that such
compensation deduction will ultimately result in a tax benefit of
approximately $921,000 which has been recorded as an increase in
capital in excess of par. In addition, the Company has adjusted its
other current assets to recognize the effect of this tax benefit.
In December 1994, options were exercised with 430,000 shares of
common stock issued to certain officers and directors for $24,000 and
an interest bearing note in the amount of $191,000. The promissory
note, including interest, was paid by the surrender of 23,153 NBTY
common shares to the Company at the prevailing market price. As a
result of the exercise of these options, the Company is entitled to a
compensation deduction for tax purposes of $1,827,500 and a
compensation deduction will ultimately result in a tax benefit of
$731,000 which has been recorded as an increase in capital in excess
of par. In addition, the Company has adjusted its current liability
to recognize the effect of this tax benefit.
The following is a summary of changes in outstanding options for the
Company's Stock Option Plans for the period ended December 31, 1995:
<TABLE>
<CAPTION>
Exercise Price
--------------
<S> <C> <C>
Shares under option, September 30, 1995
(fully exercisable) 2,395,000 $.63-$.92
Options exercised (700,000) $.63
---------
Shares exercisable, December 31, 1995
(fully exercisable) 1,695,000 $.63-$.92
=========
</TABLE>
NBTY, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL
CONDITION and RESULTS of OPERATIONS
Results of Operations:
The following table sets forth income statement data of the Company as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three months ended
December 31,
-------------------
1995 1994
------ ------
<S> <C> <C>
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 53.9 51.0
Catalog printing, postage and promotion 11.8 10.9
Selling, general and administrative 35.1 33.6
-----------------
100.8 95.5
-----------------
Income (loss) from operations (0.8) 4.5
Other income (expenses), net (0.3) (0.1)
-----------------
Income (loss) before income taxes (1.1) 4.4
Income taxes (benefit) (0.4) 1.9
-----------------
Net income (loss) (0.7)% 2.5%
=================
</TABLE>
Results of Operations
- ---------------------
For the three months ended December 31, 1995 compared to three months
ended December 31, 1994:
Net sales. Net sales in the first quarter ended December 31, 1995 were
$38,589,126 compared with $37,477,741 for the prior like period, an
increase of $1,111,385 or 3.0%. Wholesale-retail sales increased $1.7
million or 6.9%; excluding sales of Beautiful Visions, mail order vitamin
sales increased $1,643,211 or 15.2%. In 1994, sales of $2,355,773 was
attributed to Beautiful Visions which was sold October 9, 1995 (see
Note 3, sale of direct-mail cosmetics division).
Costs and expenses. Cost of sales as a percentage of sales was 53.9% for
1995 and 51.0% for 1994. The increase was attributed to sales of lower
margin products and pricing pressures.
Catalog printing, postage,and promotion expenses increased to $4,564,180
in 1995 from $4,075,142 in 1994 an increase of $489,038. As a percentage
of sales, expenses were 11.8% for the current quarter and 10.9% for the
prior like quarter. Costs associated with television advertising and
promotional programs increased $442,000 and $301,000, respectively
compared to the prior like quarter.
Selling, general and administrative expenses were $13,515,907 for the
quarter, 35.0% as a percentage of sales compared with $12,615,673 or 33.7%
of sales - an increase of $900,234. Increases were primarily in salaries
and professional fees.
Other income (charges). Included in miscellaneous is rental income.
Loss before income taxes benefit was $411,627 for 1995 and income before
income taxes was $1,647,653 for 1994. After income taxes (benefit), the
Company had a net loss of $251,142 (loss per share of $0.01) for the
quarter ended December 31, 1995, and net income of $938,541 (or earnings
of $0.05 per share) for the three months ended December 31, 1994.
Liquidity and Capital Resources
- -------------------------------
The Company has adequate working capital to meet its obligations in the
normal course of business. The Company has a three year $15 million
Revolving Credit Agreement which expires March 31, 1996. At December 31,
1995, the entire amount remained available under the current Agreement. In
February 1996, the Company received waivers relating to noncompliance of
certain covenants which existed as of December 31, 1995. The Company has
an $8.4 million equipment lease agreement expiring December 31, 1996.
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received
$350,000 in cash and non-interest bearing notes aggregating approximately
$2,145,000 for inventory, a customer list and other intangible assets. The
notes will be paid over a three-year period based on a predetermined
formula with guaranteed minimum payments. A final payment for the
remaining outstanding balance will be made on September 30, 1998. Revenues
applicable to this business were approximately $2,355,773 for the three
months ended December 31, 1994.
In December 1995, the Company purchased approximately a 60 acre tract of
land for $1,700,000 for cash.
Management believes that inflation did not have a significant impact on
operations.
NBTY, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings
LITIGATION:
There have been no material developments with respect to
litigation that occurred during this reporting period. Reference
is made to Item 3, Legal Proceedings in Form 10-K for the year
ended September 30, 1995.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
There was no form 8-K filed during the first quarter of fiscal
year ending September 30, 1996.
NBTY, INC. and SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBTY, INC.
Date: February 8, 1996 /s/ HARVEY KAMIL
Harvey Kamil, Executive Vice
President, Secretary
(Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 430,549
<SECURITIES> 0
<RECEIVABLES> 13,313,002
<ALLOWANCES> 608,004
<INVENTORY> 40,781,972
<CURRENT-ASSETS> 63,911,534
<PP&E> 77,646,340
<DEPRECIATION> 23,556,308
<TOTAL-ASSETS> 124,097,457
<CURRENT-LIABILITIES> 25,174,951
<BONDS> 12,854,146
0
0
<COMMON> 159,262
<OTHER-SE> 82,954,298
<TOTAL-LIABILITY-AND-EQUITY> 124,097,457
<SALES> 38,589,126
<TOTAL-REVENUES> 38,589,126
<CGS> 20,810,228
<TOTAL-COSTS> 20,810,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304,898
<INCOME-PRETAX> (411,627)
<INCOME-TAX> (160,485)
<INCOME-CONTINUING> (251,142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,142)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
